They're not computing numbers for the sake of computing numbers.
Imagine a future where Bitcoin dominates the markets. Then you'll have this whole planet dedicated to the computation of hashes for no other sake than computing hashes. Picture yourself an alien civilization, coming to meet us and seeing we spend most of the energy we produce computing numbers and giving them an arbitrary value.
While I think there's a lot of arbitrary stuff going on in the financial world, it's still less arbitrary than computing numbers for the sake of computing numbers.
The bitcoin network isn't just computing numbers for the sake of computing numbers. Proof-of-work is integral to the "decentralized network of trust" that is bitcoin.
Also, even if bitcoin became the dominant global currency, I highly doubt that it would take up a noticeable portion of the world's computing resources.
That's the really interesting bit about Bitcoin - it's an attempt to create a system that will enable trust in Internet-scale groups.
Currency is obviously a prime candidate for "trust", but I also think Namecoin is tremendously interesting. Next up, PKI certs? Eliminating hard-to-scale single points of trust (whether the DNS roots, VeriSign or governments) is hardly "doing nothing".
I haven't taken the time to fully understand it, but I gather that there are proposed ways to trim the block chain's history. For clients that don't need a long history, I imagine they could just download a snapshot for, say, Jan. 1, 2013, that simply listed all the bitcoins and their owners at the time, rather than all the transactions that happened before that point.
I agree with you. The idea of "mining" these numbers using an ever-increasing amount of computing power is simply absurd. They'd have done better to allocate the coins in some other way .. I don't know how, maybe distributed equally among Hacker News readers? That would be as good as anything, to get the system started.
You misunderstand the purpose of mining (which is really a misnomer). It is necessary to do a distributed, hard-to-manipulate verification of transactions. Creating new bitcoins is just tied to it as an incentive. "Mining" will continue after there are no more new bitcoins. The incentive will change to transaction fees.
Bitcoin will always number crunch. Transactions are processed in blocks, even if there is no or minimal reward for solving the block. Income can be gained from transaction fees.
This is something that has been in my mind for some time: If I understand correctly, the bitcoin generating process is based in computing SHA's.
So, I wonder if those computations could be used for something else? Maybe having a database similar to Rainbow Tables, which allows people to look for previously calculated SHA's to avoid calculating them...
Almost any proof-of-work algorithm could be used. However, if you add an algorithm which is useful to the outside, it decreases the cost of attack (since you earn something probabilistically on top of simply a block reward). Depending on what kind of algorithms you use, this could be dangerous for network security.
Haha, aside from the obvious problems of storing 2^256 hashes somewhere, having a database system that can handle all of the btc client connections, and undermining the actual proof of work system behind bitcoin's credibility, you'd be creating a useless rainbow table that didn't have any common cleartext passwords hashed in it.
They're making money out of thin air. Useful to, you know, people who haven't been able to do that before.
Meanwhile, considering the accuracy of NOAA's WX machines via-a-vis the Europeans. Useful? How about all that nano-trading on Wall Street ... not useful? Blizzard's money machines must be useful to their tens-of-millions of consumers.
People spend an extraordinary amount of time and effort digging up precious metals, much to the dismay of local populations that are usually uprooted to facilitate this.
In terms of environmental impact, Bitcoin ranks pretty low on the scale. More energy is wasted with people tuning in to "Dancing with the Stars".
